Is it possible to negotiate on a vehicle purchase?

[disneysteve]

You won't be able to negotiate the purchase price of the car after the end of lease. It's set by the bank based on the residual percentage value and it's non-negotiable. The dealership doesn't own the car - if you want to buy it, the money will go straight to the bank.

So what if the person who leased the car doesn't want to buy it? Doesn't it then get sold as a used car, at which point the price would surely be negotiable.

[safari]

So what if the person who leased the car doesn't want to buy it? Doesn't it then get sold as a used car, at which point the price would surely be negotiable.

When a leased car is returned, the dealer either purchases the car from the bank and sells it as a used car, or they send it back to the bank, which auctions it off. The dealers are obligated to purchase back a certain percentage of their leased cars, but the rules vary by manufacturer.

If the person wants to purchase their leased car, they arrange it directly with the bank without going to the dealer. That's what I did 9 years ago when my lease ended. I liked my car, it was in great shape, and the end of lease purchase price was $4K under the Blue Book value. Since the end of lease purchase price was determined at the start of the lease and since it was a new model at the time, the bank had to make a guess on how much value the car will retain at the end of the lease, and it guessed wrong by undervaluing it, which worked in my favor. So purchasing it was a no-brainer. I could have sold it immediately and made a few thousand in profit, but I decided to keep it. I am still driving that car to this day and plan on driving it for at least 5 more years.

[TexasHusker]

My advice was assuming the dealer takes the vehicle and sells it on behalf of the lender- in many cases they do. Dealerships sell lease returns every hour of every day, and the price is negotiable.

[greenskeeper]

When a leased car is returned, the dealer either purchases the car from the bank and sells it as a used car, or they send it back to the bank, which auctions it off. The dealers are obligated to purchase back a certain percentage of their leased cars, but the rules vary by manufacturer.

If the person wants to purchase their leased car, they arrange it directly with the bank without going to the dealer. That's what I did 9 years ago when my lease ended. I liked my car, it was in great shape, and the end of lease purchase price was $4K under the Blue Book value. Since the end of lease purchase price was determined at the start of the lease and since it was a new model at the time, the bank had to make a guess on how much value the car will retain at the end of the lease, and it guessed wrong by undervaluing it, which worked in my favor. So purchasing it was a no-brainer. I could have sold it immediately and made a few thousand in profit, but I decided to keep it. I am still driving that car to this day and plan on driving it for at least 5 more years.

I see it as a wash since you overpaid for the lease since the basic definition of a lease is that you pay for the depreciation of the vehicle correct?

[safari]

I see it as a wash since you overpaid for the lease since the basic definition of a lease is that you pay for the depreciation of the vehicle correct?

That's exactly right, it was a wash. I pretty much had to buy the car at the end of the lease because the residual value was so much lower than the market price.

Speaking of leases, since we're on this topic, I see too often people saying that leasing is not a good idea. It's true in most cases, but there are instances when it makes sense to lease. When leasing a car, you're paying for depreciation, which is the difference between the sale price and the price at the end of the lease (residual value). That means that the less the car will depreciate, the lower your monthly payment will be. You can reduce the depreciation by negotiating a good sale price and also choosing a car with a high residual value. Its worth pointing out that the residual value is determined based on MSRP (not the sale price), which works to your advantage. To illustrate this, here is a an example.

MSRP: $30,000
Sale Price: $25,000
Residual: 65% of MSRP or $19,500
Depreciation = $25,000 - $19,500 = $5,500

If you negotiate the sale price of $24,000, the depreciation will also go down by $1K to $4,500. There is no lower limit and in theory you can have the sale price even lower than the residual, in which case the bank will pay you to lease the car. Of course, that's not realistic, but the point I am trying to make is that not all leases are inherently bad.

In the example above, if the depreciation is $4,500 and you're leasing the car for 36 months, the monthly payment is going to be $125 (for simplicity sake I used 0% interest rate). To me that is much more attractive than buying the same car for $24,000. Let's use the same 0% interest rate and $125 monthly payment - it's going to take 192 months (or 16 years) to pay off the $24,000. If you look at these numbers, leasing is much more beneficial in this case. You will be driving a brand new car every 3 years and will always have full warranty.

Now let's look at another example.

MSRP: $30,000
Sale Price: $28,000
Residual: 55% of MSRP or $16,500
Depreciation = $28,000 - $16,500 = $11,500
Monthly Payment = $11,500 / 36 = $319.44

If you buy the same car for $28,000 instead, assuming 0% interest and the same monthly payment of $319.44, you will pay it off in 88 months (or 7.3 years). In this case buying makes more sense.

[Spiffster]

Perhaps somewhat unrelated to OP, but wanted to chime in.

Never purchase at a one price (no haggle) stealership... Always go to a dealership thats willing to negotiate. With very little effort you will always get a better deal on new or used purchase.

The only difference between these two types of dealerships is one will not negotiate, which is NOT and advantage for the buyer... and really never was ment to be, though they sell it like it is and people fall for it all the time.

This day and age you can do your homework online and tell them how much you will pay for a car, not the other way around. No real negotiation needs to be involved.

I went as far as to buy a vehicle out of state and have it shipped here because local dealerships would not accept my offer.

[GoodSteward]

You just narrowed down the only way a lease could be ok to a minute fraction of the leases that happen. Most people won't negotiate that far, won't have good credit to get the best financing offer (the ones they pull people in with), and won't buy a Japanese car..the only ones that seem to keep their value well.

Leasing assumes the value of the car based on mileage. You can't overdrive it or you have to pay the difference. I wouldn't want to be locked down like that.

I agree with DisneySteve. You are renting a car, and it isn't a good thing for people trying to save money. This is like telling people to get 0% credit card offers to pay for something when they have credit card debt to start with. Just because it looks good on paper doesn't mean it's good to do.

[TexasHusker]

You just narrowed down the only way a lease could be ok to a minute fraction of the leases that happen. Most people won't negotiate that far, won't have good credit to get the best financing offer (the ones they pull people in with), and won't buy a Japanese car..the only ones that seem to keep their value well.

Leasing assumes the value of the car based on mileage. You can't overdrive it or you have to pay the difference. I wouldn't want to be locked down like that.

I agree with DisneySteve. You are renting a car, and it isn't a good thing for people trying to save money. This is like telling people to get 0% credit card offers to pay for something when they have credit card debt to start with. Just because it looks good on paper doesn't mean it's good to do.

We are leasing a Range Rover and love the deal. No repairs, no maintenance, no worries sboit trading in and resale. Just give em the keys in 26 months and take off in a new one !

[disneysteve]

We are leasing a Range Rover and love the deal. No repairs, no maintenance, no worries sboit trading in and resale. Just give em the keys in 26 months and take off in a new one !

When you say "no repairs, no maintenance" I assume that means it's all covered by the lease payments. Surely there are repairs and maintenance even if you only have the vehicle for 26 months. So you're paying for that stuff anyway.

I can't say I've ever been worried about trading in and resale. I keep my cars until they're pretty up there in years and miles. Whatever I get for them is fine with me.

It really comes down to if you want to have an eternal car payment or if you'd rather spend your money in other ways. Also, how much you enjoy the car buying/leasing process. I hate it so I try to do it as infrequently as possible. I kept my last car (bought used) for 14 years. That was a long time with zero payments. I got my current car 4 years ago and paid it off in 1 year so I've now had 3 payment-free years so far.

[TexasHusker]

When you say "no repairs, no maintenance" I assume that means it's all covered by the lease payments. Surely there are repairs and maintenance even if you only have the vehicle for 26 months. So you're paying for that stuff anyway.

I can't say I've ever been worried about trading in and resale. I keep my cars until they're pretty up there in years and miles. Whatever I get for them is fine with me.

It really comes down to if you want to have an eternal car payment or if you'd rather spend your money in other ways. Also, how much you enjoy the car buying/leasing process. I hate it so I try to do it as infrequently as possible. I kept my last car (bought used) for 14 years. That was a long time with zero payments. I got my current car 4 years ago and paid it off in 1 year so I've now had 3 payment-free years so far.

I'm a car nut so driving one for 14 years isn't workable. I've probably had 14 cars in 14 years and miss every last one of them. Except for the 2007 Mercedes GL450, which I should have leased.

[Permanent Temp]

You won't be able to negotiate the purchase price of the car after the end of lease. It's set by the bank based on the residual percentage value and it's non-negotiable. The dealership doesn't own the car - if you want to buy it, the money will go straight to the bank.

Yup this.

[GoodSteward]

I'm a car nut so driving one for 14 years isn't workable. I've probably had 14 cars in 14 years and miss every last one of them. Except for the 2007 Mercedes GL450, which I should have leased.

In that case a lease pretty much keeps you in a new car without really affecting the monthly budget too much, I guess?

I couldn't stomach it since I like the idea of no payments. Having a newer car 24/7, however, is very appealing. Either way, I can't do this even if I wanted to since I drive a ton for ministry. I'd have a killer fee's at the end. I bought an 07 Toyota Sienna with just under 80k miles in August 2013. It now has nearly 160k miles. I registered 21,000 miles on my taxes last year between my car and my van. That is just ministry miles where I was going to visit or do church business. I live an hour and a half from the church I pastor is why.

[disneysteve]

Having a newer car 24/7, however, is very appealing.

Not to me . I like breaking it in, knowing where everything is, how everything works, what quirks it has, what fits where, etc. I would hate to have to start over again every 2 years. That would drive me nuts. I have a hard enough time when I just switch from my car to my wife's for a day.

[siggy_freud]

and won't buy a Japanese car..the only ones that seem to keep their value well.

Yup, except in a few quirky cases. Like Jeep Wranglers that hold their value extremely well.

[GoodSteward]

Not to me . I like breaking it in, knowing where everything is, how everything works, what quirks it has, what fits where, etc. I would hate to have to start over again every 2 years. That would drive me nuts. I have a hard enough time when I just switch from my car to my wife's for a day.

haha. You sound like someone who isn't fond of change. I've never been attached to a car like I was to my first real car. I had some clunkers before it, but the first car I ever owned that was mine(I paid payments on) was a 98 Toyota Camry. My brother has it now, and he blew the engine in it...twice. He needed a car, and I needed the money. I still regret that to this day.